Housing Collapse, GSEs Dominate House Financial Services April Agenda

The House Financial Services Committee’s April schedule marks a continuation of Chairman Jeb Hensarling’s (R-Texas) agenda to reform the housing market, with five hearings scheduled to examine government-sponsored enterprises Fannie Mae and Freddie Mac, the Federal Housing Administration and the Department of Housing and Urban Development.

Those dates will add to the five hearings the committee has already conducted this year regarding on the topic. In particular, the committee has investigated how government policies may have contributed to the housing market meltdown, and how the secondary market can be reformed to reduce taxpayer liability and include more private investment.

Hensarling favors a privatization of the GSEs. In his opening remarks during a March 19 hearing in which Acting Federal Housing Finance Administration Director Edward DeMarco updated the committee on the progress of the GSEs’ conservatorships, Hensarling said he was “determined” that the hearing would be the last time DeMarco or his successor will testify before the committee pens GSE reform legislation.

“This I define as legislation to once and for all abolish Fannie Mae and Freddie Mac as government-sponsored enterprises,” Hensarling said. “And two, one that would truly create a sustainable housing policy. Sustainable for our economy, sustainable for those seeking the goal of homeownership, and sustainable for hard-working taxpayers who should never, ever, be called upon again to bail out Wall Street.”

Credit union trade associations haven’t necessarily opposed GSE reform, but both CUNA and NAFCU have stressed that any reforms must include assurances that credit unions would continue to have unencumbered access to the secondary mortgage market.

In a March 18 letter to the Senate Banking Committee, which also conducted a hearing on housing reform earlier this week, NAFCU President/CEO Fred Becker said NAFCU does not support full privatization of the GSEs because of serious concerns that credit unions could be shut out from the secondary market.

NAFCU supports the creation or existence of multiple GSEs that would perform the essential functions currently performed by Fannie Mae and Freddie Mac, but added that the GSEs should be self-funded, without any dedicated government appropriation.

“GSE’s fee structures should, in addition to size and volume, place increased emphasis on quality of loans,” Becker wrote. “Credit union loans provide the quality necessary to improve the salability of agency securities.”

Two hearings – on April 10 and April 16 – will discuss regulatory relief for small community financial institutions. Although the schedule does not mention credit unions specifically, and hearings discussing regulatory burden have so far this year focused on banks, a committee staffer told Credit Union Times on Tuesday the committee does plan to conduct a hearing that will focus on credit union regulatory burden.

Other topics on the schedule include the U.S. role in the International Monetary Fund and the so-called “too big to fail” status of big banks.

All hearings will take place in the Financial Services Committee’s main hearing room, 2128 Rayburn. The committee said in a release that its schedule is tentative and will depend upon witness availability and other factors that may require changes. Therefore, each meeting will become final only when the official notice is distributed.